The recent announcement of the declining profits at Fannie Mae and Freddie Mac is reviving previous efforts made by policymakers pushing Congress to move quickly on advancing housing finance reform.

Fannie’s fourth quarter earnings fell by 66% from $6.5 billion in Q4 2013 to $1.3 billion in Q4 2014. Freddie reported a profit of $227 million in the fourth quarter compared to $8.6 billion a year ago and said it would send the government $900 million.

The National Association of Home Builders (NAHB) said the significant drops in earnings should serve as a wake-up call to Congress to move quickly to advance housing finance reform.

“A promising start was made in the last Congress when a bipartisan group of senators advanced legislation out of the Senate Banking Committee that would maintain an appropriate level of government backing to preserve financial stability and promote investor confidence. Lawmakers need to build on those efforts,” Tom Woods, chairman of NAHB, said.
Woods added that the time to act on a new housing reform policy is now while Fannie Mae and Freddie Mac remain in relatively good financial health, and “not to kick the can down the road and wait until a possible crisis develops.”

The declining profits don’t reflect trouble in the GSEs’ mortgage business, which has continued to report consistent earnings. Fannie Mae’s net interest income was $5.1 billion in the fourth quarter compared to $4.9 billion during the same period of 2013.

That upswing is mostly due to to rising home prices and settlements, but those won’t last forever.

Fannie and Freddie were put into government conservancy in 2008 after teetering on the brink of insolvency. A $197.5 billion cash infusion from the U.S. Treasury saved the mortgage finance giants. Under the terms of the bailout, the GSEs have to send their profits to the government and cannot build their capital buffer.

According the Wall Street Journal, policy makers put the current bailout structure in place with the idea that by now, Congress would have approved or would be moving toward a broad overhaul of the housing-finance system, replacing Fannie and Freddie.

Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho) introduced legislation in early 2014 that would dismantle Fannie and Freddie and replace them with a new federal mortgage insurer.

“Everyone agrees that conservatorship cannot continue forever, so I hope my colleagues will keep working towards a more certain future for the housing market,” Johnson said today at the Senate Banking Committee hearing with Watt. “If Congress cannot agree on a smooth, more certain path forward, I urge you, Director Watt, to engage the Treasury Department in talks to end the conservatorship.”